Most Chinese stocks fell as a slowdown in the nation’s manufacturing growth overshadowed speculation that the government will soon ease monetary policies to spur the economic expansion.
Anhui Conch Cement Co. and Baoshan Iron & Steel Co. led a retreat for industrial companies after the Purchasing Managers’ Index slid to 50.4 in October, the lowest since February 2009. Poly Real Estate Group Co., the nation’s second-largest developer, lost the most in two weeks after SouFun Holdings Ltd. said home prices fell for a second month amid price cuts. China Life Insurance Co., the biggest insurer, advanced 2.3 percent after UBS AG said a rebound for equities will boost profits.
“The drop in PMI may shatter investors’ confidence and reignite concerns that earnings in the fourth quarter may be worse than expected,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “Stocks may fluctuate at the current level.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 1.77 points, or 0.1 percent, to 2,470.02 at the close. About six stocks fell for every five that rose. The CSI 300 Index gained 0.1 percent to 2,697.53.
The Shanghai measure surged 4.6 percent last month, the best monthly rally since October 2010, with gains accelerating after Premier Wen Jiabao said on Oct. 25 the government will fine-tune economic policies at an “appropriate time.” The government said yesterday it will lower the threshold for payment on value-added and business taxes for small companies. It has announced measures to help small businesses through easier access to bank loans.
Still, the gauge is down 12 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that’s near a three-year high. The tightening helped slow the growth in the world’s second-largest economy to 9.1 percent in the third quarter from a year earlier, the least in two years. Inflation fell to 6.1 percent in September from 6.5 percent in July. The Shanghai Composite is valued at 11.5 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.
A gauge of 48 material stocks in the CSI 300 slid 0.6 percent, the most among the 10 industry groups. Anhui Conch, China’s biggest cement maker, fell 0.8 percent to 19.99 yuan. Baoshan Steel, the listed unit of China’s second-biggest steelmaker, lost 0.4 percent to 5.25 yuan. China Shenhua Energy Co., the nation’s largest coal producer, retreated 0.6 percent to 26.81 yuan.
Today’s manufacturing data from the National Bureau of Statistics and the China Federation of Logistics and Purchasing compared with the median 51.8 estimate in a Bloomberg News survey of 16 economists and 51.2 in September. Gauges of new export orders, new orders and output all dropped last month.
“The weak PMI figure may prompt the government to loosen policies going forward such as a cut in reserve-requirement ratios for small banks and that’ll be positive for stocks,” Liu Li-Gang, head of Greater China Economics at Australia & New Zealand Banking Group Ltd., said in an interview in Bloomberg’s Shanghai office. “China’s economy is poised for a soft landing in the fourth quarter rather than a hard landing.”
A separate manufacturing index released today by HSBC Holdings Plc and Markit Economics rose to 51 from 49.9. The surveys target smaller companies have methodologies.
The Bloomberg China-US 55 Index fell 2.1 percent yesterday as Premier Wen said Oct. 29 the government should “firmly” keep curbs on the housing market.
Poly Real Estate slid 3.5 percent to 9.95 yuan, the biggest loss since Oct. 18. China Vanke Co., the nation’s biggest listed property developer, dropped 3 percent to 7.76 yuan. Gemdale Corp. retreated 3.5 percent to 4.99 yuan.
Home prices dropped 0.23 percent last month from September when they retreated 0.03 percent, the first in a year, according to SouFun, the nation’s biggest real estate website owner. Prices slid in 58 of 100 cities tracked by the company, including Shanghai and Beijing, it said in a statement.
Vanke is cutting prices on homes in Beijing and Shenzhen projects, and plans to offer discounts to buyers in Huizhou and Dongguan in Guangdong province, 21st Century Business Herald reported, without saying where it got the information. Li Jun, an official at Vanke’s press department, couldn’t be reached at his office in Shenzhen.
China Life climbed 2.3 percent to 17.10 yuan. Ping An Insurance (Group) Co., China’s second-biggest insurer, added 1.4 percent to 39.22 yuan. China Pacific Insurance (Group) Co., the third largest, rose 2.8 percent to 20.35 yuan.
“The insurance sector could be the first to hit a double earnings/valuations low among all the A-share sectors,” UBS said in a note. It said a rebound for stocks and bonds, and improving liquidity in the coming months will bolster profits.
The 886 companies on the Shanghai Composite concluded the release of third-quarter profits yesterday. They posted a 20 percent earnings increase in the period on average, trailing analysts’ estimates by 6.4 percent, according to data compiled by Bloomberg. That compared with a 26 percent average gain in second-quarter earnings, the data showed.